Monday, November 24, 2008

Paradox Lost - The Four Major Mistakes GOOD Leaders Make in Tough Times

ThinkingA global client recently told me that they were considering instituting across the board cost-cutting measures, including major reductions in their leadership training. He also said his company was evaluating the feasibility of centralizing several previously decentralized operations, as well as increasing the frequency of sales-call reporting. I congratulated him on taking measures that would improve his short-term financial performance, but then asked how much he wanted to hurt long-term performance by implementing the four major mistakes good leaders make in tough times:

1. Cutting cost without protecting strategic expenditures.

2. Reducing training in a time when employees actually have time to learn.

3. Centralizing functions without considering the benefits of decentralization.

4. Increasing pressure to perform without assessing the impact of stress.

In reality, the global client described in the first paragraph does not exist as a single entity. However, in the last few months I've consulted with several clients on the precipice of committing some or all of these missteps. Their error was in thinking that they had a problem to solve instead of a paradox to manage. A paradox is a statement that seems self-contradictory but in reality expresses a possible truth. It is derived from the Latin word paradoxum, meaning beyond belief.

To be able to think paradoxically is a very rare, desirable and effective leadership skill. (1) The essence of thinking paradoxically is, as F. Scott Fitzgerald once wrote, "the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function." In times of stress, the tendency for many leaders is to focus on addressing one issue in the paradox instead of managing the tension between both interdependent issues. For example, what if instead of making the four major mistakes, leaders eXpanded their thinking by asking four paradoxical questions:

1. How can we cut costs and protect our strategic expenditures? Professors Robert Kaplan and David Norton remind us that cutting discretionary spending across the organization is a major mistake because it fails to distinguish between short-term operational issues and long-term strategic issues. There is nothing wrong with using a scalpel to excise operational slack and inefficiencies. But turning on the chainsaw to treat a flesh wound will seldom do the trick. These researchers recommend creating a new expenditure category, called strategic expenditures to supplement the traditional capital and operational expenditure categories.

2. How could we cut costs and increase training? The amount of training should increase during tough times, but the expenditures for training do not need to. This can be accomplished by conducting internal lunch-n-learns, making education an agenda item during meetings, and creating an educational library for you and your staff. You can also increase job shadowing, coaching, and mentoring because there is often a slowdown in the daily workflow during tough times. How surprised will you be when you see an educated, engaged and motivated team as the workload increases?

3. How can we better manage the tension between centralization and decentralization? Any good leader wants the ball when the game is on the line. Often, as the Los Angeles Lakers found out in the 2008 NBA championships, this is a mistake. (The Lakers kept trying to put the ball in the hands of Kobe Bryant at the end of the games. The Boston Celtics’ defense was able to shut Kobe down.) Although ego may play a role, my experience is most leaders feel an obligation to make difficult decisions during tough times. They want more control over costs, approval of initiatives, and impact on key decisions. Tamara Ericsson, president of nGenera Innovation Network, points out that leaders often forget that there is wisdom in their crowds, their company, even when the heat is on. She recommends that leaders resist the temptation to over centralize during tough times by asking more questions, building trust through increased collaboration, and challenging the status quo. These ideas worked for Jorma Ollila during his tenure as CEO of Nokia. How might they work for you?

4. How can we improve sales performance and manage stress at the same time? An executive of a medical distribution company recently told me that one of the companies that he distributes for is calling him twice as often because of decreased sales. He told me that the increased pressure is annoying him and his team. They are currently seeking other partners and considering dropping the irksome company. Professor Stewart Friedman has found that you have the best chance of producing results during tough times if you acknowledge the pressure everyone is under and show that you care about your team and their lives… beyond work. Remember, people don't care how much you know until they know how much you care… about what they care about. How do your people know you really care about what they care about?

Of course, tough times require difficult decisions. Yet, I've been helping leaders ask and answer paradoxical questions for over a decade. My experience and research strongly suggests that the most effective leaders resist the temptation to always choose sides during tough times. They know the power of both/and thinking. They recognize the need to manage the tension between interdependent and opposing issues. Although paradoxical, these eXpansive leaders understand that it is not ‘beyond belief.’ Do you?

Keep on eXpanding,


1. Robert S. Kaplan, David P. Norton, Stewart D. Friedman, BV Krishnamurthy, Tamara J. Erickson, Jeffrey M. Stibel, Peter Delgrosso: Unconventional Wisdom in a Downturn, ‘Harvard Business Review,’ December 2008, 28-31.

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